Clear, consistent, and comparable presentation of a company’s financial condition is a hallmark of transparency in U.S. trading markets. Thus, regulatory attention often focuses on instances where companies stray from using generally accepted accounting principles (GAAP) and report non-GAAP measures in financial statement filings with the U.S. Securities and Exchange Commission (SEC).

The SEC’s December 2022 update to its Compliance & Disclosure Interpretations (“C&DIs”) on the use of non-GAAP financial measures included clarification on Question 100.04 related to the use of individually tailored accounting measures. With the new guidance, the SEC has clarified that it is concerned over potential misleading financial statements not just on the revenue side, but also on the expense side.

With non-GAAP financial measures a top area of interest for SEC staff comment letters, this paper examines trends in comment letters related to Question 100.04 issues.

Using the CompanyIQ SEC Comment Letters database, we analyzed non-GAAP comment letters that were issued to all U.S. public companies from 2019-March 2023 and then focused on Question 100.04 comments in terms of frequency, form type, sector, and issue analysis.